Portugal’s stable regulatory and political environment continued to attract investors in offshore blocks, despite the disclosure in 2015 regarding royalty-like rates on deepwater concessions, according to a GlobalData report.
Licenses awarded in 2015 revealed that royalty-like charges as high as 12% of gross production or €0.25 per barrel of oil equivalent (boe) depending on the licence type were levied on all deepwater concession agreements leading to speculation that offshore investments might be affected as a result.
However, with two new concessions granted in September 2015, Portugal’s deepwater acreage still appears to attract investors.
The report titled ‘Portugal Upstream Fiscal and Regulatory Report – Competitive Deepwater Regime Attracts Interest Despite Application of Royalties‘, cites the case of Eni-Galp consortium, which plans to drill Portugal’s first offshore well in 2016 to indicate the upswing in the country’s offshore business.
The nation is expected to become a more attractive offshore investment destination in the event of a commercial discovery, given its strong administrative framework.
The nation’s fiscal and regulatory policies related to the offshore oil and gas sector have remained stable since 1994. Despite demand to cut corporate income tax rates, the current rates are expected to prevail over the medium term owing to the regime’s focus on reducing the impact of spending cuts and lowering government debt.
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By GlobalDataThe GlobalData report further points out that the royalty-like rates may change for new licenses and contract renegotiations as higher rates were charged for licences signed in 2011, compared to those agreed upon in 2007 to secure greater benefits from the offshore sector.
Portugal’s upstream oil and gas industry is still emerging and is yet to be explored to its full potential with no commercial discoveries being made until now. Public opposition to drilling in coastal areas, coupled with weak crude prices has forced the authorities to target for more revenues from projects and licenses leading to the imposition of royalties.
A consortium led by Repsol postponed its drilling plan for blocks in Areas 230 and 231 citing the poor price environment, leading to the cancellation of a planned tender process for four shallow water blocks and two deepwater blocks in the Porto basin, as well as one deep offshore block in the Algarve basin.
